Question

Robinson Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 (taxed at 34 percent). During the year, Robinson reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000. During the year, Congress reduced the corporate tax rate to 21 percent. Robinson's deferred income tax expense or benefit for the current year would be:

Answer 1

Answer:

deferred income tax benefit during 2018:     6,700

deferred income tax liability ending balance 27,400

Explanation:

beginning deferred tax laibility 34,000

this will change to 21,000 for the tax rate change

(100,000 x 21% = 21,000)

thus there is a decrease of 13,000 in the tax liablity

Then:

book income                    400,000

temporary differenc(net): (30,000)

Taxable income               370,000

30,000 x 21% = 6,300 additional deferred tax expense

13,000 benefit - 6,300 deferred tax expense = 6.700 benefit